Today’s Mid Year Economic and Financial Outlook (MYEFO) statement didn’t contain any significant changes to the super laws – however Treasurer Wayne Swan was still able to slug SMSFs. The ATO’s Supervisory Levy will rise from $200 to $259 and together with changes in how the levy is collected, the Government will net an additional $319 million from SMSFs over the next four years.
The Government will bring forward the payment of the levy so that it is collected in the same year of income. Currently, SMSFs pay the levy when they lodge their annual return – so that funds lodging their Annual Return for the 2011/12 year now are paying the 2011/12 levy of $180. In future, you will pay the levy during the actual tax year.
The Government says that it will implement the change in the timing of the collection of the levy over two years to give SMSFs “time to adjust”. This means that in the 2013/14 financial year, your fund will pay the 2012/13 levy and potentially part of the 2013/14 levy.
The levy is also being increased – from a scheduled $200 for the 2012/13 year to $259 for the 2013/14 year.
One other slug that might affect some funds is the value of a Commonwealth Penalty Unit, which is being increased from $110 to $170 per unit. This means, making a material administrative error or breaching the Act is going to become more expensive.
Potential CGT impost on deceased estates eliminated
On a positive note, the Government announced that it will amend the law to allow the tax exemption for earnings on assets supporting superannuation pensions to continue following the death of a fund member in the pension phase until the deceased member’s benefits have been paid out of the fund. This will ensure that super fund trustees can dispose of pension assets on a tax-free basis to fund the payment of death benefits. This change will take effect from 1 July 2012.
This change addresses a problem that was raised in a draft ATO Tax Ruling (TR 2011/D3) that dealt with the stopping of a pension following the death of a member, unless a dependent beneficiary of the deceased was automatically entitled under the Fund’s trust deed to receive the pension.
Potentially, some funds may have seen the tax status on the assets supporting the pension change from tax free to taxable on the member’s death, which would also have meant that the fund was liable for capital gains tax (CGT) from the date of the member’s death. This problem is now resolved – the Treasurer deserves credit for fixing this issue.
Trustees will still need to pay out the benefits on a timely basis, as superannuation law requires the benefits of a deceased member to be paid out of the fund as soon as practicable following the member’s death.
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